Wednesday, July 11, 2018

Capacity Crunch

‘Unprecedented’ demand strains US surface
transport.

Barreling
down the highway like an out-of-control semi-trailer, US freight demand is
spiking, squeezing already tight capacity and further pushing up rates. Both
spot and contract rates are accelerating, propelled by a combination of factors
that have cumulatively created a market being called “unprecedented.”

These
factors include tight oil pipeline capacity in Texas that is tapping flatbed
and tanker trucks, continued strong demand for manufactured goods, a late start
to produce season due to a late, wet spring in many areas, and the three-day
International Roadcheck truck inspection blitz. Truckload contract rates are up
about 11 percent on average, according to industry analysts, in what is being
called “the strongest market anybody with a memory can imagine.”

The
Cass Freight Index for May, released Friday, showed shipment volumes up 11.9
percent from a year ago, while the Cass Freight Shipper Expenditure Index was
up 17.3 percent year over year, reflecting the higher prices shippers must pay
to get goods delivered, reported the Journal of Commerce.

“This
market is unprecedented,” said Rob Estes, president and CEO of Estes Express
Lines, the largest privately owned LTL (less than truckload) carrier, saying
the growth in business exceeds the previous peak of 2004 and 2005, when high
freight demand and tight capacity fueled frenetic growth, eventually checked by
the Great Recession. “There’s more opportunity than we can possibly handle.”

Spot
rates in the top 100 US truckload lanes, meanwhile, have surged 26 percent on
average year over year entering June, when the differential jumped to 29
percent. Demand in drayage and intermodal rail-highway shipping is also
spiking, leading to a “perfect storm” situation. For some shippers, the
challenge may be moving from having to pay higher rates to finding transport at
all.

To
avoid last-minute “dialing for diesels,” frantically scrambling to find
someone, anyone, to move a load, shippers need to work with savvy industry
professionals and nail down their carrier relationships.

About TOTALogistix

TOTALogistix is a privately held corporation headquartered in Sparta, NJ. We helped define the Third Party Logistics Industry in 1991. Today we provide a wide spectrum of transportation and related supply chain management services to manufacturers, retailers and distributors throughout North America.
In our 20+ years in business, we’ve saved money for nine out of ten companies whose transportation we’ve analyzed. We’re confident we can do the same for you. Improving logistics performance starts here.